A 90 billion euro ($105 billion) EU loan for Ukraine, blocked by Hungary under outgoing Prime Minister Viktor Orban, could be revived following Orban’s defeat in an election this month and a resumption of Russian oil deliveries to Hungary over Ukraine.
European Union leaders had decided last December to jointly borrow the money to lend to Ukraine to fund its defence against Russia for this year and next, using frozen Russian funds as a potential backstop to ensure that Moscow ultimately pays.
HOW WILL EUROPE LEND UKRAINE THE MONEY?
The EU will provide interest-free loans for the years 2026-2027 based on EU borrowing on capital markets backed by the EU budget headroom, which is the difference between the maximum amount the EU can ask EU members to contribute and the amount it needs to cover foreseen expenses.
Hungary, Slovakia and the Czech Republic, with governments seen as closer to Moscow, secured exemptions that mean they will not participate in the joint borrowing.
REPAYMENT
Ukraine is not expected to pay the money back from its own funds, with the capital only due for repayment once Russia pays war reparations after the conflict is over.
Russia has central bank assets that are frozen in the EU which are worth around 210 billion euros and which could be used for the repayment.
The scheme was designed to effectively make use of the frozen Russian funds to help Ukraine without confiscating the money, a step that had been rejected as legally risky.
WHAT WILL IT COVER?
The 90 billion euros is to cover two-thirds of Ukraine’s needs for the next two years, estimated at 135 billion euros in total. Of the total, Ukraine will get 45 billion euros in 2026 and another 45 billion in 2027.
Each year, 28 billion euros will be for spending on military needs and 17 billion on general budget needs.
Brussels expects other developed countries sympathetic to Ukraine to provide the rest of the funding, which has already been promised for 2026.
WHAT WERE THE HURDLES?
The idea of joint EU borrowing against the EU budget seemed initially impossible as it required unanimity and faced opposition from Orban.
Hungary, Slovakia and the Czech Republic agreed to let the scheme go ahead after EU leaders agreed it would not impact them financially.
Hungary later blocked the loans after it stopped receiving Russian oil via the Druzhba pipeline across Ukraine’s territory. Kyiv says the pipeline was shut as a result of damage from a Russian strike.
Prospects for unblocking the loan brightened when Orban lost an election on April 12 and the incoming prime minister Peter Magyar said he would not oppose the disbursements. Also, the Druzhba pipeline has been repaired by the Ukrainians and oil is about to start flowing.
(REUTERS)
